Goldman Sachs is to shut its Global Alpha Fund, a hedge fund that uses computer-driven models to make money, after having suffered losses of around 12 per cent so far this year, media reports said. The fund is to close by the end of October.

The hedge fund has around $1 billion in assets. A number of clients have been redeeming money held in the fund, according to the Wall Street Journal, citing an unnamed source.

In a letter to clients quoted by the WSJ, Goldman Sachs said: "We have begun liquidating the assets of the fund." Goldman said it would distribute 85 to 90 per cent of the hedge fund's assets to investors, while keeping some cash for possible legal costs tied to a claim by Lehman Brothers.

Global Alpha was created in 1997 by Goldman and was initially led by legendary Goldman trader Cliff Asness. Asness left in 1998, the WSJ report said.

According to the latest industry figures, hedge funds are, on average, down for the year, after difficult markets in August erased earlier mild gains since January.